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Edited version of your private ruling
Authorisation Number: 1012533006423
Ruling
Subject: Asset lease and the interaction between Division 250 and Divisions 230, 770 and 775
Question 1
Will the company be required to assess or deduct, under section 230-15 of the Income Tax Assessment Act 1997 (ITAA 1997), any gains or losses arising from the lease or the "financial arrangement in the form of a loan" taken to exist by section 250-155 of the ITAA 1997?
Answer
No
Question 2
Will Division 230 otherwise affect the amount or timing of the company's assessable income or deductions in respect of any gains or losses arising from the lease or the "financial arrangement in the form of a loan" that is taken to exist by section 250-155 of the ITAA 1997?
Answer
No
Question 3
Are the following both "special accrual amounts" (as defined in section 995-1 of the ITAA 1997), being amounts that are included in assessable income under Subdivision 250-E of the ITAA 1997:
(1) A gain or loss that the company is taken, for the purposes of section 250-205 of the ITAA 1997, to make for an income year under section 250-250 of the ITAA 1997; and
(2) the balancing adjustment made under the method statement in subsection 250-275(1) of the ITAA 1997?
Answer
Yes
Question 4
Given that the company is deemed to have lent an amount to the borrower under subsection 250-155(3) of the ITAA 1997 and to have received an amount under the loan per subsection 250-155(6) of the ITAA 1997, does forex realisation event 2 happen for the company each time the lessee makes a rental payment to the company?
Answer
No
Question 5
Assuming the lease rental payments are made by the lessee when the payments become due and payable, will any gain or loss attributable to movements in foreign currency exchange rates in respect of the lease rental payments be taken into account in calculating the company's taxable income under Division 775 of the ITAA 1997 or otherwise under sections 6-5 or 6-10 of the ITAA 1997?
Answer
No
Question 6
Does the worked example accurately and completely set out how the company's taxable income in respect of the lease arrangement will be calculated, having regard to the following provisions: sections 6-5, 6-10, and 8-1, and Divisions 230, 250, 775, and 960 of the ITAA 1997?
Answer
Yes
Question 7
Where the company makes a foreign exchange gain or loss from the amortising principal repayment of the company's foreign currency denominated debt that was designated as a hedge of the principal repayment portion of the foreign currency denominated lease rental payments, will any part of the gain or loss be reasonably attributable to a hedged item that is or produces non-assessable non-exempt income for the purposes of subsection 230-310(4) of the ITAA 1997?
Answer
No
Question 8
Where the company makes a loss from the financial arrangement represented by the company's foreign currency denominated debt that was designated as a hedge of the principal repayment portion of the foreign currency denominated lease rental payments, will any part of the loss be made in gaining or producing non-assessable non-exempt income for the purposes of section 230-30 of the ITAA 1997?
Answer
No
Question 9
Where the company makes a gain from the financial arrangement represented by the company's foreign currency denominated debt that was designated as a hedge of the principal repayment portion of the foreign currency denominated lease rental payments, will any part of the gain be non-assessable non-exempt income by virtue of subsection 230-30(2) of the ITAA 1997?
Answer
No
Question 10
Does the full amount of foreign country withholding tax deducted at source by the lessee "count towards the tax offset" for the purposes of subsection 770-10(1) of the ITAA 1997?
Answer
No
Question 11
Alternatively, does the following proportion of each amount of foreign country royalty withholding tax deducted at source by the lessee "count towards the tax offset" for the purposes of subsection 770-10(1) of the ITAA 1997: the overall gain that the company is taken to make from the deemed loan under subsection 250-155(8), divided by the gross lease rental payments that are financial benefits subject to deemed loan treatment (calculated in the relevant foreign currency)?
Answer
Yes
This ruling applies for the following periods:
Year ending XX/XX/XXXX
Year ending XX/XX/XXXX
Year ending XX/XX/XXXX
Year ending XX/XX/XXXX
Year ending XX/XX/XXXX
Year ending XX/XX/XXXX
Year ending XX/XX/XXXX
Year ending XX/XX/XXXX
Year ending XX/XX/XXXX
Year ending XX/XX/XXXX
Year ending XX/XX/XXXX
Year ending XX/XX/XXXX
The scheme commences on:
Year ending XX/XX/XXXX
Relevant facts and circumstances
The taxpayer applied for a ruling in relation to a financing transaction. Relevant facts and documents were submitted.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 6-5
Income Tax Assessment Act 1997 section 6-10
Income Tax Assessment Act 1997 section 8-1
Income Tax Assessment Act 1997 Division 230
Income Tax Assessment Act 1997 section 230-15
Income Tax Assessment Act 1997 section 230-30
Income Tax Assessment Act 1997 subsection 230-30(2)
Income Tax Assessment Act 1997 paragraph 230-30(3)(b)
Income Tax Assessment Act 1997 section 230-45
Income Tax Assessment Act 1997 subsection 230-45(1)
Income Tax Assessment Act 1997 paragraphs 230-45(1)(d), (e) and (f)
Income Tax Assessment Act 1997 section 230-55
Income Tax Assessment Act 1997 subsection 230-310(4)
Income Tax Assessment Act 1997 subsection 230-335(10)
Income Tax Assessment Act 1997 section 230-460
Income Tax Assessment Act 1997 subsection 230-460(2)
Income Tax Assessment Act 1997 paragraph 230-460(2)(c)
Income Tax Assessment Act 1997 Division 250
Income Tax Assessment Act 1997 section 250-5
Income Tax Assessment Act 1997 section 250-155
Income Tax Assessment Act 1997 subsection 250-155(1)
Income Tax Assessment Act 1997 subsection 250-155(3)
Income Tax Assessment Act 1997 subsection 250-155(6)
Income Tax Assessment Act 1997 subsection 250-155(8)
Income Tax Assessment Act 1997 section 250-250
Income Tax Assessment Act 1997 paragraph 250-265(1)(b)
Income Tax Assessment Act 1997 subsection 250-180(3) and (4)
Income Tax Assessment Act 1997 section 250-185
Income Tax Assessment Act 1997 Subdivision 250-E
Income Tax Assessment Act 1997 section 250-205
Income Tax Assessment Act 1997 section 250-215
Income Tax Assessment Act 1997 sections 250-235 to 250-255
Income Tax Assessment Act 1997 section 250-245
Income Tax Assessment Act 1997 subsection 250-245(3)
Income Tax Assessment Act 1997 sections 250-265 to 250-275
Income Tax Assessment Act 1997 subsection 250-275(1)
Income Tax Assessment Act 1997 Division 770
Income Tax Assessment Act 1997 Subdivision 770-A
Income Tax Assessment Act 1997 section 770-5
Income Tax Assessment Act 1997 section 770-10
Income Tax Assessment Act 1997 subsection 770-10(1)
Income Tax Assessment Act 1997 Division 775
Income Tax Assessment Act 1997 section 775-45
Income Tax Assessment Act 1997 paragraph 775-45(1)(b)(iii)
Income Tax Assessment Act 1997 paragraph 775-45(3)(a)
Income Tax Assessment Act 1997 Division 960
Income Tax Assessment Act 1997 subsection 960-50(5)
Income Tax Assessment Act 1997 subsection 995-1(1) 'special accrual amount'