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Edited version of private advice
Authorisation Number: 1051750455345
Date of advice: 25 November 2020
Ruling
Subject: Payments to a trust
Question 1
Is Company A entitled to claim a deduction for payments to Trust A, under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)?
Answer
Yes
Question 2
Is Company A required to include in its assessable income under section 6-5 of the ITAA 1997, amounts derived from its related entities in respect of payments to Trust A?
Answer
Yes
Facts
Company A is an Australian resident company. Trust A is a fixed trust settled in Australia.
Company A makes certain payments to Trust A with contributions received from several related entities.
Reasons
Company A is entitled to claim a deduction for payments to Trust A under section 8-1 of ITAA 1997 because the payments are incurred in gaining or producing assessable income of Company A and they not considered to be capital or of a capital nature.
The amounts derived by Company A from the related entities are ordinary income. Therefore, they are assessable to Company A under section 6-5 of the ITAA 1997.