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Edited version of your written advice
Authorisation Number: 1051305104577
Date of advice: 17 November 2017
Ruling
Subject: Funding agreement
In order to protect the privacy and commercial in-confidence components of this private binding ruling the following summary is provided.
The taxpayer (A Co) entered into a funding agreement with Entity B for funding of $x to assist with project costs. Under the funding agreement A Co will repay the full $x to Entity B.
The funding agreement provides that $x advanced to A Co is unconditionally repayable. The $x will be recognised as a liability in the accounts of A Co and is a ‘sub-ordinated’ debt.
The taxpayer sought a ruling on the assessability of the $x advanced under the funding agreement.
The Commissioner ruled that the $x satisfied the characteristics of a loan and therefore the amount was not assessable.