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Edited version of your written advice
Authorisation Number: 1051313336038
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You cannot rely on this edited version in your tax affairs. You can only rely on the advice that we have given to you or to someone acting on your behalf.
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Date of advice: 8 December 2017
Ruling
Subject: Deductibility of certain project payments
Question
Will the Payments incurred by Entity M be deductible pursuant to section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)?
Answer
Yes
Relevant facts and circumstances
Entity M entered into an Agreement in respect of certain assets (the Project) with Entity Q.
The Project comprises various phases. At the conclusion of the Project, Entity M’s rights to access the assets will come to an end and Entity Q will maintain its ownership of the assets. Entity M will have no proprietary rights in the assets.
Entity Q will grant Entity M rights to access the assets and any areas necessary to undertake the Project. Entity M will pay the Payments to Entity Q over a period of the Project in order to enter the assets and provide the contracted services.
Entity Q will pay certain Payments to Entity M over a period of the Project and will pay other amounts to Entity M over another period of the Project. Entity M will include the Amounts and other amounts in its assessable income.
Entity M will subcontract parts of the Project to subcontractors.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 8-1
Income Tax Assessment Act 1997 Paragraph 8-1(1)(a)
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)
Income Tax Assessment Act 1997 Division 230
Income Tax Assessment Act 1997 Subsection 230-20(4)
Income Tax Assessment Act 1997 Paragraph 230-460(2)(e)
Reasons for decision
All legislative references are to provisions of the Income Tax Assessment Act 1997 (ITAA 1997) unless otherwise stated.
Question 1
Summary
The Payments will be deductible under section 8-1.
Detailed reasoning
The Payments incurred by Entity M will be deductible pursuant to section 8-1. Entity M incurred the Payments in the course of gaining or producing its assessable income and the Payments are not capital or capital in nature.