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Ruling
Subject: Deductibility of payments
Question 1
Does section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) permit a deduction to an entity for specific payments (the payments)?
Answer
Yes.
Question 2
Will Part IVA of the Income Tax Assessment Act 1936 (ITAA 1936) apply to the arrangement?
Answer
No.
This ruling applies for the following period:
Income year ended 30 June 2010
The scheme commences on:
During the year ended 30 June 2010
Relevant facts and circumstances
An entity has made the payments.
Relevant legislative provisions
Income Tax Assessment Act 1936 Subsection 177A(1)
Income Tax Assessment Act 1936 Section 177C
Income Tax Assessment Act 1936 Subsection 177C(1)
Income Tax Assessment Act 1997 Section 8-1
Income Tax Assessment Act 1997 Subsection 8-1(1)
Income Tax Assessment Act 1997 Subsection 8-1(2)
Income Tax Assessment Act 1997 Paragraph 8-1(2)(a)
Income Tax Assessment Act 1997 Paragraph 8-1(2)(b)
Income Tax Assessment Act 1997 Paragraph 8-1(2)(c)
Income Tax Assessment Act 1997 Paragraph 8-1(2)(d)
Reasons for decision
Question 1
It is considered the payments have the character of a loss or outgoing incurred in the course of gaining or producing assessable income or in carrying on a business for the purpose of gaining or producing assessable income.
The payments are not considered to be a loss or outgoing of capital or of a capital nature. On the basis that paragraphs 8-1(2)(b) of the ITAA 1997 to paragraph 8-1(2)(d) of the ITAA 1997 have no application, the entity is entitled to claim a deduction for the payments pursuant to subsection
8-1(1) of the ITAA 1997.
Question 2
Part IVA of the ITAA 1936 has no application.