Edited version of private advice

Authorisation Number: 1052216395043

Date of advice: 5 February 2024

Ruling

Subject: Deductions - black hole expenditure

Question

Are the transaction costs incurred by Company A during the period 1 July 20XX to 30 June 20XX in respect of transaction advisory and professional services deductible under subsection 40-880(2) of the ITAA 1997 to the extent that they relate to Company A's business?

Answer

Yes.

This ruling applies for the following period:

Year ended 30 June 20XX

The scheme commenced on:

30 June 20XX

Relevant facts and circumstances

Group overview

1.            Company A is an Australian resident company and the primary operating entity of the Group B group of companies.

2.            Together with Company A, the Group B group of companies also comprises a number of other operating and non-operating entities which are each, directly or indirectly, wholly-owned subsidiaries of Group B HoldCo.

Financial and tax profile

3.            Company A did not have any exempt income or non-assessable non-exempt (NANE) income for the period 1 July 20XX through 30 June 20XX.

4.            Further, for the period 1 July 20XX through 30 June 20XX:

a.            Group B was consolidated for accounting purposes, but had neither formed nor joined an income tax consolidated group (TCG), and

b.            all Group B entities prepared their accounts and income tax returns using the accruals basis.

Identification of potential growth opportunities

5.            Starting in early 20XX, Group B began to develop a potential plan to list through an Initial Public Offering (IPO).

6.            By late 20XX, the plans for an IPO were put aside due to unfavourable market conditions at the time and other considerations around its suitability.

7.            Following the decision not to proceed with an IPO, Group B decided to seek potential investors to provide additional growth capital for the purposes of expanding the business' scale and operations.

8.            Group B subsequently began discussions with a third party around raising capital, however these discussions did not result in any subsequent transactions.

9.            Company A then engaged Corporate Advisor M which was briefed to assist with identifying potential growth opportunities for Group B.

10.         At the time Corporate Advisor M was engaged, it was unclear what form any transaction would ultimately take. Further, it was unclear whether any resulting transaction would only involve Company A itself, all of Group B, or some discreet part of the group.

11.         During 20XX, Group B identified a number of potential growth opportunities.

12.         Concurrently with the identification of potential growth opportunities, Group B began to prepare an Information Memorandum (IM) and vendor due diligence (VDD) materials to facilitate further discussions and any eventual transaction.

13.         To assist with the development of the IM and VDD materials, Group B engaged Professional Advisor O and Professional Advisor P over the course of 20XX.

14.         In late 20XX, Company A received a Non-Binding Letter of Intent (Letter of Intent) for a merger with Acquirer Co (the Merger).

15.         In the Letter of Intent, it was expressed that the Merger was expected to produce a number of benefits for both Group B and Acquirer Co.

The Merger

16.         In 20XX, Company A engaged Legal Advisor N to provide legal advisory and due diligence services.

17.         The sale and purchase agreement giving effect to the Merger was signed in 20XX following completion of Acquirer Co's due diligence processes.

18.         The Merger involved Acquirer Co acquiring 100% of the issued shares in Group B HoldCo and, indirectly, 100% of the shares in each other constituent entity of Group B, in return for Group B HoldCo shareholders receiving consideration in the form of cash and shares.

19.         Group B's business activities have continued following the Merger in a materially similar, albeit expanded, form.

Professional advisor fees

20.         The fee structures adopted by each professional advisor were:

a.            Corporate Advisor M was engaged on a monthly retainer, with an additional success fee payable based on the resulting opportunity,

b.            Legal Advisor N was engaged based on time spent in relation to relevant matters associated with the Merger,

c.            Professional Advisor O charged fixed fees for the majority of services rendered, with an additional success fee payable upon completion of the Merger, and

d.            Professional Advisor P charged a fixed fee for services rendered.

21.         Between late 20XX and early 20XX, the professional advisors issued invoices to Group B in respect of services provided according to their respective engagements (Transaction Costs).

22.         All invoices were directed to, paid, and borne by Company A.

23.         The majority of the invoices were paid prior to the Merger, with a select few remaining unpaid as at the date of the Merger. Further, invoices received from each of the professional advisors were either payable within 14 days of receipt or upon presentation.

24.         No cost sharing or cost allocations agreements have been entered into by any entity in Group B with respect to the Transaction Costs.

Relevant legislative provisions

Income Tax Assessment Act 1997 subsection 40-880(2).

Reasons for decision

Deductibility under section 40-880, overview

Subsection 40-880(1) outlines the overarching object of the provision as being:

(1) The object of this section is to make certain * business capital expenditure deductible over 5 years, or immediately in the case of some start-up expenses for small businesses, if:

(a) the expenditure is not otherwise taken into account; and

(b) a deduction is not denied by some other provision; and

(c) the business is, was or is proposed to be carried on for a * taxable purpose.

Entitlement to a deduction arises under subsection 40-880(2) which provides:

(2) You can deduct, in equal proportions over a period of 5 income years starting in the year in which you incur it, capital expenditure you incur:

(a) in relation to your * business; or

(b) in relation to a business that used to be carried on; or

(c) in relation to a business proposed to be carried on; or

(d) to liquidate or deregister a company of which you were a * member, to wind up a partnership of which you were a partner or to wind up a trust of which you were a beneficiary, that carried on a business.

Subsections 40-880(2A) and 40-880(2B) outline a number of limitations and variations to the general deduction provisions in subsection 40-880(2), none of which apply in the present circumstances.

Subsection 40-880(3) limits the amount deductible under subsection 40-880(2) consistent with the objective outlined in paragraph (c) of subsection 40-880(1):

(3) You can only deduct the expenditure, for a • business that you carry on, used to carry on or propose to carry on, to the extent that the business is carried on, was carried on or is proposed to be carried on for a * taxable purpose.

Subsection 40-880(4) provides for a variation of the 'taxable purpose' test in subsection 40-880(3) in respect of expenditure incurred in relation to a business that another entity used to carry on or proposes to carry on and is not applicable in the present circumstances.

Subsection 40-880(5) enumerates ten exclusions to section 40-880(2) which, consistent with paragraphs (a) and (b) of subsection 40-880(1), state that:

(5) You cannot deduct anything under this section for an amount of expenditure you incur to the extent that:

(a) it forms part of the * cost of a * depreciating asset that you * hold, used to hold or will hold; or

(b) you can deduct an amount for it under a provision of this Act other than this section; or

(c) it forms part of the cost of land; or

(d) it is in relation to a lease or other legal or equitable right; or

(e) it would, apart from this section, be taken into account in working out:

(i) a profit that is included in your assessable income (for example, under section 6-5 or 15-15); or

(ii) a loss that you can deduct (for example, under section 8-1 or 25-40); or

(f) it could, apart from this section, be taken into account in working out the amount of a * capital gain or * capital loss from a * CGT event; or

(g) a provision of this Act other than this section would expressly make the expenditure non-deductible if it were not of a capital nature; or

(h) a provision of this Act other than this section expressly prevents the expenditure being taken into account as described in paragraphs (a) to (f) for a reason other than the expenditure being of a capital nature; or

(i) it is expenditure of a private or domestic nature; or

(j) it is incurred in relation to gaining or producing * exempt income or * non-assessable non-exempt income.

Of the exclusions in subsection 40-880(5), only those contained in paragraphs 40-880(5)(b) and 40-880(5)(f) are of relevance in respect of the Transaction Costs. These exclusions are considered below. The other exclusions are not applicable in the present case.

Finally, subsections 40-880(6) through 40-880(9) additionally provide further variations, exclusions, and limitations to the operation of the provision - none of which are applicable to Company A and the Transaction Costs.

Subsection 40-880(2)

In the present case, the Transaction Costs were ostensibly incurred, not in respect of a business formerly carried on or proposed to be carried on, but rather in respect of the business carried on by Company A and Group B more broadly both immediately before and after the Merger.

Consequently, the Transaction Costs would, prima facie, be deductible over five years, starting from the income year commencing 1 July 20XX, under paragraph (a) of subsection 40-880(2), provided and to the extent that:

a.         the amounts were incurred on or after 1 July 2005

b.         the expenditure is of a capital nature

c.         the amounts related to Company A's business, as carried on immediately prior to the Merger

d.         Company A carried on its business for a taxable purpose, and

e.         none of the relevant exceptions in subsection 40-880(5) apply.

'Incurred'

'Incurred' is not a statutorily defined term and the courts have not sought to develop an exhaustive definition at common law (Taxation Ruling TR 97/7 Income tax: section 8-1 - meaning of 'incurred' - timing of deductions at paragraphs 4 to 5).

Rather, the following series of principles have developed through case law which, whilst not definitive, can assist in determining whether an amount has been 'incurred' for the purposes of subsection 40-880(2) (TR 97/7 at paragraph 6):

(a) a taxpayer need not actually have paid any money to have incurred an outgoing provided the taxpayer is definitively committed in the year of income. Accordingly, a loss or outgoing may be incurred within section 8-1 even though it remains unpaid, provided the taxpayer is 'completely subjected' to the loss or outgoing. That is, subject to the principles set out below, it is not sufficient if the liability is merely contingent or no more than pending, threatened or expected, no matter how certain it is in the year of income that the loss or outgoing will be incurred in the future. It must be a presently existing liability to pay a pecuniary sum;

(b) a taxpayer may have a presently existing liability, even though the liability may be defeasible by others;

(c) a taxpayer may have a presently existing liability, even though the amount of the liability cannot be precisely ascertained, provided it is capable of reasonable estimation (based on probabilities);

(d) whether there is a presently existing liability is a legal question in each case, having regard to the circumstances under which the liability is claimed to arise;

(e) in the case of a payment made in the absence of a presently existing liability (where the money ceases to be the taxpayer's funds) the expense is incurred when the money is paid.

Company A was obliged to pay the Transaction Costs under invoices issued pursuant to engagement agreements executed between the relevant advisors and Company A.

Whilst the majority of these invoices were settled and paid in full prior to the Merger, a select few remained unpaid as of the date of the Merger as the eligible payment period had not yet closed. In respect of these outstanding invoices, payment was nonetheless governed by the terms of the relevant engagement agreements, which provided that each invoice received by Company A in respect of the Transaction Costs was due and payable either upon presentation or within 14 days of receipt.

Consequently, Company A either paid or was 'definitively committed' to paying each of the Transaction Costs during the relevant income year (see FC of T v James Flood Pty Ltd (1953) 88 CLR 492 at 506) and is taken to have incurred these amounts on or after 1 July 2005 for the purposes of subsection 40-880(2).

'Capital expenditure'

In Hallstroms Pty Ltd v Federal Commissioner of Taxation (1946) 72 CLR 634; [1946] HCA 34, Dixon J observed at 647, in the context of distinguishing between expenditure of a capital or revenue nature, that:

As a prefatory remark it may be useful to recall the general consideration that the contrast between the two forms of expenditure corresponds to the distinction between the acquisition of the means of production and the use of them; between establishing or extending a business organization and carrying on the business; between the implements employed in work and the regular performance of the work in which they are employed; between an enterprise itself and the sustained effort of those engaged in it.

The expression 'capital expenditure' is not a defined term and paragraph 64 of Taxation Ruling TR 2011/6 Income tax: business related capital expenditure - section 40-880 of the Income Tax Assessment Act 1997 core issues confirms that 'Whether expenditure is capital in nature is determined on the facts of each particular case having regard to the principles established by the case law'. Paragraphs 66 to 68 of TR 2011/6 outlines these key principles.

The leading authority in Australia for determining whether an amount is on capital or revenue account is the High Court decision of Sun Newspapers Ltd v Federal Commissioner of Taxation (1938) 61 CRL 337; (1938) 5 ATD 23; (1938) 1 AITR 403, in which Dixon J held at 363 that:

There are, I think, three matters to be considered, (a) the character of the advantage sought, and in this its lasting qualities may play a part, (b) the manner in which it is to be used, relied upon or enjoyed, and in this and under the former head recurrence may play its part, and (c) the means adopted to obtain it; that is, by providing a periodical reward or outlay to cover its use or enjoyment for periods commensurate with the payment or by making a final provision or payment so as to secure future use or enjoyment.

Of the three elements outlined above, the nature of the advantage sought is often regarded as carrying the most weight in any characterisation assessment of an expense or outgoing. This was affirmed by the High Court in GP International Pipecoaters Pty Ltd v Federal Commissioner of Taxation (1990) 170 CLR 124; [1990] HCA 25 at paragraph 13 where it was held that '...the character of the advantage sought by the making of the expenditure is the chief, if not the critical, factor in determining the character of what is paid...'.

In Foley Brothers Pty Ltd v. FC of T (1965) 13 ATD 562; (1965) 9 AITR 635, in holding that outgoings incurred for the purpose of altering the organisation or structure of the profit-yielding subject of a capital nature, Kitto, Taylor and Menzies JJ, stated that (13 ATD 562 at 563):

The true contrast is between altering the framework within which income-producing activities are for the future to be carried on and taking a step as part of those activities within the framework.

Additionally, in Clough Limited v Commissioner of Taxation [2021] FCAFC 197, the Full Court of the Federal Court of Australia summarised the framework in which the nature of a particular advantage and, by extension, the character of a corresponding amount of expenditure is to be discerned as (at paragraphs 69 to 70):

69 Characterising expenditure from a practical and business perspective, having regard to the legal nature of the various rights created, used or brought to an end by that expenditure, requires regard to be had to the whole commercial context. It involves "both a wide survey and an exact scrutiny of the taxpayer's activities": Western Gold Mines (NL) v Commissioner of Taxation (WA) [1938] HCA 5; (1938) 59 CLR 729 at 740; AusNet at [74] (Gageler J citing Western Gold Mines at 740). One reason it is necessary to have regard to the whole context is that "expenditure of a kind ordinarily treated as being on revenue account in one set of circumstances may be treated as on capital account in another set of circumstances": AusNet at [19] (French CJ, Kiefel and Bell JJ).

70 The question of characterisation must be approached from the perspective of the person incurring the outgoing. An inquiry into the character of the receipt of the outgoing in the hands of the recipient at best distracts attention from the critical task of characterisation. As Dixon J stated in W Nevill & Co Ltd v Federal Commissioner of Taxation [1937] HCA 9; (1937) 56 CLR 290 at 306: "there is no necessary connection between the two questions and, indeed, an attempt to obtain guidance in the solution of one by considering the other is not without danger"; see also: Federal Commissioner of Taxation v Rowe [1997] HCA 16; (1997) 187 CLR 266 at 291-292; AusNet at [66] (French CJ, Kiefel and Bell JJ).

Further, the required analysis may necessitate both identifying the character of the advantage sought once that advantage is identified and delineated as well as identifying what advantage was, in fact, sought by the taxpayer in making the relevant payments (Federal Commissioner of Taxation v South Australian Battery Makers Pty Ltd (1978) 140 CLR 645; [1978] HCA 32, at 655).

Thus, the relevant inquiry is: in incurring the Transaction Costs, what advantage did Company A, taking into account all the circumstances and broader context, seek to effect from a practical and business perspective?

The specific scopes of work of each professional advisor as well as the totality of the steps leading up to the Merger both demonstrate that Company A's objective in engaging the professional advisors was to identify and evaluate opportunities for growth for itself and Group B more broadly. It is also clear from this that the professional advisors were engaged to execute the Merger once it was identified as the group's optimal option.

Put another way, the Transaction Costs were expenses that were integral to or causative of the Merger rather than incidental or secondary costs which served one or more other business purposes, but which happened to arise merely because the Merger occurred. Similarly, the Transaction Costs were expenses which did not serve multiple discreet commercial objectives, but rather were wholly and exclusively directed to a single overarching purpose - identifying and giving effect to whole-of-enterprise growth opportunities.

Regarding the character of this advantage, it was always intended that the growth opportunities to be pursued by Company A, including the Merger, were to involve the expansion, alterations or augmentation of the Group B profit yielding structure. Thus, the Transaction Costs were not expenditure incurred as an incidence of Company A carrying on its ordinary business or in the prosecution of its standard profit-making operations but were instead incurred for the purpose of altering the structure within which that business was carried on and those operations were undertaken.

As a consequence, the whole of the Transaction Costs constitute capital expenditure and satisfy this element of section 40-880(2).

'Related to Company A's business'

Paragraph 40-880(2)(a) allows a taxpayer to deduct an amount of capital expenditure they have incurred in relation to their business. The expenditure must relate to an existing business that the taxpayer is carrying on at the time they incur the expenditure (paragraph 98 of TR 2011/6).

Under this paragraph, only the taxpayer carrying on the business, and no other taxpayer, is entitled to a deduction (paragraph 99 of TR 2011/6).

In accordance with paragraph 21 of TR 2011/6, the reference in paragraph 40-880(2)(a) to 'your business' is a reference to the taxpayer's overall business rather than a particular undertaking or enterprise within the overall business. Similarly, where the taxpayer is the head company of a consolidated group, 'your business' refers to the overall business of the head company.

The term 'business', is defined in subsection 995-1(1) as any profession, trade, employment, vocation or calling, but does not include occupation as an employee. The identification and delineation of a business, or multiple businesses, as well as its nature and scope for the purposes of section 40-880 is a factual inquiry specific to each case.

'To the extent'

Although the phrase 'to the extent' is not present in subsection 40-880(2), the Commissioner considers that where expenditure has been incurred on more than one business or object, the capital expenditure must be apportioned in such a way that a deduction is only available to a taxpayer 'to the extent' the expenditure is incurred in relation to the taxpayer's business. TR 2011/6 relevantly states that:

136. The use of the expression 'to the extent that' in subsections 40-880(3), 40-880(4) and 40-880(5) indicates that an apportionment may be required when applying those subsections. In contrast, subsection 40-880(2) does not contain the expression 'to the extent that'.

137. Nevertheless, the Commissioner considers that the absence of the expression 'to the extent that' in subsection 40-880(2) does not prevent an apportionment if the taxpayer incurs an amount of expenditure in relation to both a matter covered by any of paragraphs 40-880(2)(a) to 40-880(2)(d) and another matter.

140. Accordingly, expenditure incurred on a thing or service as an undivided amount where distinct and severable parts of the thing or service relate to different businesses or objects needs to be apportioned against the relevant paragraphs of subsection 40-880(2) on some fair and reasonable basis: see Ronbipon Tin at page 59.

141. Likewise, apportionment must be made on a fair and reasonable basis on the facts of the case where:

(a) a single amount is incurred for a thing or service that indifferently serves business and non-business objects or that indifferently services two or more businesses, at least one of which is not of the type specified in subsection 40-880(2). An example is where a single outlay is for a service that indifferently serves two current businesses only one of which is the taxpayer's.In the present case, Group B was, at least since the engagement the corporate advisor, undecided as to whether the transaction or growth opportunity to be pursued was to relate to one, several, or all the member entities of the group or what the precise form of any such transaction or opportunity would ultimately be.

Further, the Merger as undertaken did, in fact, impact upon the profit yielding structure of the entirety of Group B. This is because when the acquisition of shares in Group B HoldCo by Acquirer Co occurred, each group entity stood to benefit from the attendant advantages of the enlarged business.

Consequently, as the professional advisors were each engaged to assist with one or more of the identification, evaluation or execution of as-yet-unidentified growth opportunities or the eventual Merger, the Transaction Costs incurred by Company A were not incurred exclusively in relation to Company A's business.

Instead, whilst the Transaction Costs may have been incurred for a singular commercial purpose - that purpose related to the businesses carried on by each entity within Group B.

Therefore, for the purposes of this private ruling and in accordance with paragraph 141 of TR 2011/6, an apportionment must be made on a fair and reasonable basis in order to determine which portion of the Transaction Costs relate to Company A's business.

'Taxable purpose'

'Taxable purpose' is defined in subsection 40-25(7) to include 'the purpose of producing assessable income' which is, itself, defined in subsection 995-(1) as something done:

(a) for the purpose of gaining or producing assessable income; or

(b) in carrying on a * business for the purpose of gaining or producing assessable income.

Company A has not derived NANE income from any source nor any amounts of exempt income.

Consequently, for the period up to and including the Merger, Company A operated its business solely for the purpose of deriving assessable income and it follows that subsection 40-880(3) will not limit the deductibility of any of the Transaction Costs which are reasonably attributable to Company A's business.

Exclusions in subsection 40-880(5)

Finally, in order to be fully deductible under subsection 40-880(2), the Transaction Costs cannot be in full or in part subject to one of the exclusions in subsection 40-880(5) - paragraphs (b) and (g) of which has been considered below.

For completeness, no other paragraph of subsection 40-880(5) is considered to apply in the circumstances.

Deductible under another provision

Section 40-880(5)(b) prohibits a deduction under sections 'you can deduct an amount for it under a provision of this Act other than this section.'

In light of the nature of the Transaction Costs, the potentially applicable provisions which might otherwise allow for a deduction are:

a.         In respect of all Transaction Costs - section 8-1 (the general deduction provisions).

b.         In respect of invoices issued by Professional Advisor O in so far as they relate to tax advisory services - sections 8-1 (the general deduction provisions) and 25-5 (tax-related expenses).

Deductibility under section 8-1

The general deduction provision in section 8-1 provides that:

(1) You can deduct from your assessable income any loss or outgoing to the extent that:

(a) it is incurred in gaining or producing your assessable income; or

(b) it is necessarily incurred in carrying on a • business for the purpose of gaining or producing your assessable income.*

(2) However, you cannot deduct a loss or outgoing under this section to the extent that:

(a) it is a loss or outgoing of capital, or of a capital nature; or

(b) it is a loss or outgoing of a private or domestic nature; or

(c) it is incurred in relation to gaining or producing your * exempt income or your * non-assessable non-exempt income; or

(d) a provision of this Act prevents you from deducting it.

Thus, to be deductible under section 8-1, the Transaction Costs must both:

a.         satisfy one of the 'positive limbs' in subsection 8-1(1); and

b.         not fall within one of the 'negative' limbs in subsection 8-1(2).

In light of the conclusion above that the Transaction Costs constitute capital expenditure, these amounts are not deductible under section 8-1.

Deductibility under section 25-5

Subsection 25-5(1) allows for a deduction in respect of expenditure a taxpayer incurs in respect of, inter alia, managing its tax affairs.

'Tax affairs' is defined in section 995-1 as affairs relating to 'tax' which is, itself, defined as:

(a) income tax imposed by the Income Tax Act 1986, as assessed under this Act; or

(b) income tax imposed as such by any other Act, as assessed under this Act.

Relevantly however, section 25-5 including several limitations and exclusions including, relevantly, subsection 25-5(4) which provides that an amount is not deductible under section 25-5 where it constitutes capital expenditure. Consistent with the analysis of section 8-1 above, the Transaction Costs are therefore not deductible under section 25-5.

Consequently, paragraph (b) of subsection 40-880(5) would not apply to prohibit any part of the Transaction Costs attributable to Company A being deductible under subsection 40-880(2).

'Taken into account' in a capital gain or loss

Paragraph (f) of subsection 40-880(5) denies a deduction under subsection 40-880(2) for an amount which 'could, apart from this section, be taken into account in working out the amount of a capital gain or capital loss from a CGT event'.

According to paragraph 2.73 of the explanatory memorandum to the Tax Laws Amendment (2006 Measures No 1) Bill 2006 (Cth), which introduced paragraph (f) of subsection 40-880(5):

...An amount is not taken into account in working out a capital gain or loss if the expenditure cannot be included in the cost base or reduced cost base of the asset (e.g., expenses related to the sale of a CGT asset that falls through)...

As the Transaction Costs were incurred for the purposes of analysing and executing the Merger, being the disposal of whole of Group B to Acquirer Co, they did not relate to any capital asset of Company A such that Company A could include them in the cost base or reduced cost base of any asset for the purposes of the capital gains regime.

Further, whilst the Merger resulted in the partial realisation of shares in Group B HoldCo by its shareholders, the Transaction Costs were incurred solely by Company A and would not form part of the cost base or reduced base the shareholders of Group B HoldCo had in their respective shares at the time of the Merger (nor of any other asset held by any other taxpayer).

Consequently, paragraph (f) of subsection 40-880(5) would not apply to prohibit any part of the Transaction Costs attributable to Company A being deductible under subsection 40-880(2).

Summary and Conclusion

In summation, the Commissioner has made the following conclusions in the respect of the Transaction Costs:

a.         Company A had incurred each of the Transaction Costs prior to the Merger either by way of cash payment or by incurring a definitive obligation to make payment (i.e., they were more than mere accounting entries or provisions).

b.         The Transaction Costs were incurred solely for the purpose of giving effect to, or bringing about, the Merger and did not serve multiple separate purposes indifferently.

c.         As the Merger altered the whole of Group B's operating structure, it was necessary related, at least in part, to Company A's business as a constituent member of that group.

d.         As Group B had not formed a TCG, the extent to which the Transaction Costs related to Company A's business is to be considered separate and apart from those of the other Group B entities.

e.         Company A itself carried on its business exclusively for a taxable purpose (that is, the purpose of gaining or producing assessable income).

f.          The Transaction Costs were not otherwise deductible under any other provision, nor were they taken into account for the purposes of determining a capital gain or loss of Company A or any other entity.

It follows from the above that the Transaction Costs, to the extent that they relate to Company A's business as apportioned on a fair and reasonable basis, are deductible to Company A in equal proportions over a period of 5 income years starting in the income year commencing 1 July 20XX under subsection 40-880(2).