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Edited version of your written advice
Authorisation Number: 1012895918686
Date of advice: 16 October 2015
Ruling
Subject: Subvention Payments - Commissions and Establishment Fees
Question 1
Does X satisfy the definition of a 'financial arrangement' under section 230-45 of the Income Tax Assessment Act 1997 (ITAA 1997)?
Answer
Yes
Question 2
Does the exception in subsection 230-460(2) of the ITAA 1997 apply in respect of X?
Answer
No
Question 3
Is Payment A a 'financial benefit' A Co has a right to receive under X pursuant to subsection 230-60(2) of the ITAA 1997?
Answer
Yes
Question 4
Is Payment B a 'financial benefit' A Co has an obligation to provide under X pursuant to subsection 230-60(1) of the ITAA 1997?
Answer
Yes
Question 5
Is Payment C 'financial benefit' A Co has a right to recevie under X pursuant to subsection 230-60(2) of the ITAA 1997?
Answer
Yes
Relevant facts and circumstances
A Co provides solutions to support the purchasing of X-Brand products in Australia.
B Co is the Australian entity responsible for the sales of X-Brand products in Australia. A Co provides a range of packages.
A Co is an Australian tax resident entity which is not a member of a tax consolidated group.
A Co has not made any elections in respect of the TOFA provisions.
Payment B are costs A Co incurred in carrying on a business for the purposes of gaining or producing assessable income, and not a loss or outgoing of a private or domestic nature or incurred in relation to A Co's gaining or producing non-assessable non-exempt income.
Payments A, B and C are a financial benefit under section 974-160 of the ITAA 1997.
Relevant legislative provisions
Division 230 of the ITAA 1997
Reasons for decision
Question 1
Does X satisfy the definition of a 'financial arrangement' under section 230-45 of the Income Tax Assessment Act 1997 (ITAA 1997)?
Detailed reasoning
X has met all of the relevant requirements of a financial arrangement under section 230-45 of the ITAA 1997.
Question 2
Does the exception in subsection 230-460(2) of the ITAA 1997 apply in respect of X?
Detailed reasoning
As the rights and/or obligations arising under X do not meet any of the circumstances in subsection 230-460(2) of the ITAA 1997, the exceptions in subsection 230-460(2) of the ITAA 1997 does not apply in respect of X.
Question 3
Is Payment A a 'financial benefit' A Co has a right to receive under X pursuant to subsection 230-60(2) of the ITAA 1997?
Detailed reasoning
As Payment A has met all of the relevant requirements of subsection 230-60(2) of the ITAA 1997, it is considered to be a financial benefit A Co has a right to receive under X pursuant to subsection 230-60(2) of the ITAA 1997.
Question 4
Is Payment B a 'financial benefit' A Co has an obligation to provide under X pursuant to subsection 230-60(1) of the ITAA 1997?
Detailed reasoning
As Payment B has met all of the relevant requirements of subsection 230-60(1) of the ITAA 1997, it is considered to be a financial benefit A Co has an obligation to provide under X pursuant to subsection 230-60(1) of the ITAA 1997.
Question 5
Is Payment C a 'financial benefit' A Co has a right to receive under X pursuant to subsection 230-60(2) of the ITAA 1997?
Detailed reasoning
As Payment C has met all of the relevant requirements of subsection 230-60(2) of the ITAA 1997, it is considered to be a financial benefit A Co has a right to receive under X pursuant to subsection 230-60(2) of the ITAA 1997.