ATO Interpretative Decision
ATO ID 2014/34
Income Tax
Section 82KK: anti-avoidance - supply of goods or provision of services by an associate-
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This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Issue
Does the anti-avoidance provision of subsection 82KK(2) of the Income Tax Assessment Act 1936 (ITAA 1936) have application to a loss or outgoing that the taxpayer incurs in respect of the provision of legal services by an associate?
Decision
Yes. Subsection 82KK(2) of the ITAA 1936 applies to a loss or outgoing that a taxpayer incurs in respect of the provision of legal services by the associate.
Facts
During the 2014 income year an associate of the taxpayer provided legal services to the taxpayer.
The associate issued an invoice for their services to the taxpayer in the same income year.
The taxpayer is on accruals basis of accounting.
The associate is on a cash basis, and will accordingly return the income in the income year received.
The preconditions in subsections 82KK(1) and 82KK(5) of the ITAA 1936 as well as other preconditions in subsection 82KK(2) of the ITAA 1936 are satisfied.
Reasons for Decision
Subsection 82KK(2) of the ITAA 1936 has application in relation to the supply of goods or services where the supply of goods or the provision of services to which the loss or outgoing applies occurs in the same income year.
Subsection 82KK(2) of the ITAA 1936 excludes losses or outgoings where the loss or outgoing is in respect of the supply of goods or the provision of services at a time that occurs after, or during a period that occurs after or extends beyond, the end of the relevant year of income.
Paragraph 82KK(2)(a) of the ITAA 1936 does not exclude the application of subsection 82KK(2) to the 'supply of goods or the provision of services' altogether.
In this case:
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- The legal services provided by an associate was provided in the 2014 income year.
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- The invoice by the associate for the legal services was issued in the 2014 income year.
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- The loss or outgoing by the taxpayer relating to the legal services was, but for the application of the provision, incurred in the 2014 income year.
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- Provision of legal services is a provision of service, and
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- All other relevant preconditions are satisfied.
Therefore, the anti-avoidance provision of subsection 82KK(2) of the ITAA 1936 applies to the taxpayer.
Amendment History
| Date of Amendment | Part | Comment |
|---|---|---|
| 12 December 2014 | Facts | Include additional sentence for clarity. |
Legislative References:
Income Tax Assessment Act 1936
subsection 82KK(1)
subsection 82KK(2)
subsection 82KK(5)
paragraph 82KK(2)(a)
Keywords
Anti avoidance
Legal services
Associate
Date reviewed: 9 August 2018
ISSN: 1445-2782
| Date: | Version: | |
| 14 November 2014 | Original statement | |
| You are here | 12 December 2014 | Updated statement |