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Edited version of your private ruling
Authorisation Number: 1012587627292
Ruling
Subject: purchase and leasing of an asset
The Commissioner was asked to rule on the following questions.
Question 1
Is the sub-lessor liable to pay income tax under subsection 128B(5A) of the Income Tax Assessment Act 1936 (ITAA 1936) on payments it receives from the lessee under the sub-lease of the asset?
Answer
No.
Question 2
Does the Commissioner consider that the sub-lessor has a permanent establishment in accordance with Article 5 of the relevant tax treaty and will it therefore require the sub-lessor to include the income it receives from the lessee under the sub-lease of the asset in its assessable income under subsection 6-5(3) of the ITAA 1997 in determining its Australian taxable income?
Answer
No.
Question 3
Is the head lessor required to withhold an amount under section 12-245 of Schedule 1 to the Tax Administration Act 1953 (TAA) from interest it pays to non-resident third party lenders in relation to the 'future loans'?
Answer
No.
Question 4
Is the head lessor liable to pay income tax under subsection 128B(5A) of the ITAA 1936 as a result of the payments it receives from the sub-lessor under the head lease of the asset?
Answer
No.
Question 5
Does the Commissioner consider that the head lessor has a permanent establishment in accordance with Article 5 of the relevant tax treaty and will it therefore require the head lessor to include the income it receives from the sub-lessee under the head lease of the asset in its assessable income under subsection 6-5(3) of the ITAA 1997 in determining its Australian taxable income?
Answer
Yes.
Question 6
Is the head lessor entitled to a deduction for the decline in value of 'the asset' under section 40-25 of the ITAA 1997?
Answer
Yes.
Question 7
Subject to the potential application of thin capitalisation rules in Division 820 of the ITAA 1997, can the head lessor claim a deduction under section 8-1 of the ITAA 1997 for interest expenses incurred in relation to the 'future loans'?
Answer
Yes.
Question 8
Subject to the potential application of the thin capitalisation rules in Division 820 of the ITAA 1997, and assuming that the head lessor is subject to the taxation of financial arrangements rules in Division 230 of the ITAA 1997, is the head lessor entitled to a deduction under subsection 230-15(2) of the ITAA 1997 for losses made in relation to the 'future loans'?
Answer
Yes.
Question 9
Is the head lessor entitled to a deduction under section 8-1 of the ITAA 1997 for legal costs it incurred when negotiating and drafting agreements for the purchase of the asset and the company's lease of the asset to the sub-lessor?
Answer
No.
Question 10
Is the head lessor entitled to a deduction under section 25-20 of the ITAA 1997 for legal costs it incurred when negotiating and drafting agreements for the company's lease of 'the asset' to the sub-lessor?
Answer
Yes.
Question 11
Is the head lessor entitled to a deduction under section 8-1 of the ITAA 1997 for legal costs it incurred when negotiating and drafting agreements in relation to the sub-lease of the asset by the sub-lessor?
Answer
No.
Question 12
Is the head lessor entitled to a deduction under section 8-1 of the ITAA 1997 for management costs it incurred in managing its lease of the asset to the sub--lessor?
Answer
Yes.
Question 13
Will the Commissioner make a determination under paragraphs 177F(1)(a), 177F(1)(b) or subsection 177F(2A) of the ITAA 1936 to cancel a tax benefit that has been obtained, or would, but for section 177F of the ITAA 1936 be obtained, under the scheme?
Answer
No.
This ruling applies for the following periods:
Year ended 31 December 2013
Year ending 31 December 2014
Year ending 31 December 2015
Year ending 31 December 2016
Year ending 31 December 2017
Year ending 31 December 2018
Year ending 31 December 2019
Year ending 31 December 2020
Year ending 31 December 2021
Year ending 31 December 2022
Year ending 31 December 2023
Year ending 31 December 2024
Year ending 31 December 2025
The scheme commences on:
1 January 2013
Relevant facts and circumstances
The taxpayer has applied for a private ruling in relation to a leasing transaction.
Relevant legislative provisions
Subsection 128B(5A) of the ITAA 1936
Section 128B of the ITAA 1936
Subsection 128B(2B) of the ITAA 1936
Subsection 128B(3) of the ITAA 1936
Subparagraphs 128B(2B)(a)(ii) 1936
Subparagraph 128B(2B)(b)(i) of the ITAA 1936
Subsection 128B(1A) of the ITAA 1936
Subsection 6(1) of the ITAA 1936
Section 4 of the International Tax Agreements Act 1953
Subsection 4(2) of the International Tax Agreements Act 1953
Paragraph 17A(5)(b) of the International Tax Agreements Act 1953
Paragraph 6-5(3)(a) of the ITAA 1997
Subsection 995-1(1) of the ITAA 1997
Section 6C of the ITAA 1936
Paragraph 6C(1)(a) of the ITAA 1936
Subsection 6(C)(2) of the ITAA 1936
Section 12-245 of Schedule 1 to the TAA 1953
Division 11A of Part III of the ITAA 1936.
Section 12-300 of Schedule 1 to the TAA 1953
Subsection 3AA(2) of the TAA 1953
Section 301-175 ITAA 1997
Section 306-15 of the ITAA 1997
Division 840 of the ITAA 1997
Subdivision 840-M of the Income Tax (Transitional Provisions) Act 1997
Subparagraphs 128B(2B)(a)(ii) of the ITAA 1936
Subsection 40-25(1) of the ITAA 1997
Section 40-30 of the ITAA 1997
Subsection 40-30(1) of the ITAA 1997
Section 40-40 of the ITAA 1997
Subsection 40-25(2) of the ITAA 1997
Subsection 40-25(7) of the ITAA 1997
Subsection 8-1(1) of the ITAA 1997
Subsection 8-1(2) of the ITAA 1997
Division 820 of the ITAA 1997
Division 230 of the ITAA 1997
Subsection 230-15(2) of the ITAA 1997
Section 230-45 of the ITAA 1997
Section 230-50 of the ITAA 1997
Section 230-55 of the ITAA 1997
Subsection 230-45(1) of the ITAA 1997
Subsection 230-45(2) of the ITAA 1997
Paragraphs 230-45(2)(a) of the ITAA 1997
Paragraphs 230-45(2)(b) of the ITAA 1997
Paragraphs 230-45(2)(c) of the ITAA 1997
Paragraphs 230-45(2)(d) of the ITAA 1997
Section 974-160 of the ITAA 1997
Subsection 974-160(1) of the ITAA 1997
Subsection 974-160(2) of the ITAA 1997
Subsection 230-30(3) of the ITAA 1997
Subsection 230-35(3) of the ITAA 1997
Subsection 230-35(1) of the ITAA 1997
Subdivision 230-H of the ITAA 1997
Division 230 of the ITAA 1997
Paragraph 25-20(1)(a) of the ITAA 1997
Section 25-20 of the ITAA 1997
Part IVA of the ITAA 1936
Section 177F of the ITAA 1936
Subsection 177F(1) of the ITAA 1936
Paragraph 177F(1)(a) of the ITAA 1936
Paragraph 177F(1)(b) of the ITAA 1936
Subsection 177F(2A) of the ITAA 1936
Paragraph 177C(1)(bc) of the ITAA 1936
Section 177A of the ITAA 1936
Section 177C of the ITAA 1936
Section 177D of the ITAA 1936
Subsection 177A(1) of the ITAA 1936
Subsection 177C(1) of the ITAA 1936
Paragraph 177C(1)(a) of the ITAA 1936
Paragraph 177C(1)(b) of the ITAA 1936
Subsection 177CB(1) of the ITAA 1936
Section 177CB of the ITAA 1936
Subsection 177CB(2) of the ITAA 1936
Subsection 177CB(3) of the ITAA 1936
Subsection 177CB(4) of the ITAA 1936
Subsection 177D(1) of the ITAA 1936
Subsection 177D(2) of the ITAA 1936
Subsection 177A(5) of the ITAA 1936
Subsection 177D(3) of the ITAA 1936
Subsection 177D(5) of the ITAA 1936
Section 177A of the ITAA 1936
Reasons for decision.
The reasons for decision were provided to the rulee.